State Bar of Michigan
home member area contact us


ethics



 print this page


for members
SBM general information

member directory

admissions, ethics, and
   regulation


diversity & inclusion

justice initiatives

member services

practice management
   resource center


public policy resource
   center


publications and
   advertising


research and links

sections & committees


ethics for members
ethics developments
ethics opinions
TAON (trust accounts)


from the courts
opinion searching
virtual court


for the public
public resources
media resources


giving opportunities
a lawyer helps
access to justice
   campaign

Ethics Opinion

print this page

THIS OPINION LIMITS R-10 AND RI-342.

RI-350

July 26, 2010

    Syllabus. This Opinion limits Opinion R-10 and Opinion RI-342 (which replaced RI-304) to the extent they interpret a lawyer and client relationship to define who is the client, as such an interpretation is a matter for the legislature or the courts, and is not a matter of interpretation of the Rules of Professional Conduct. This Opinion revisits the questions posed in Opinions R-10 and RI-304, and summarizes the guidance intended by them.

    References: MRPC 1.0, 1.2(a), 1.4(a), 1.5(c), 1.7(a), 1.7(b), 1.8(f), 1.16(a), 1.16(b), 2.1, 4.3, 5.4(c)

TEXT

The purpose of this opinion is to resolve the confusion that may have resulted from certain previous work of this Committee in its Opinions R-10, RI-304 and RI-342[1]. In each of these opinions, the Committee considered the ethical obligations of a lawyer engaged by a fiduciary of a person or an estate (or trust). Each opinion focused on, and purported to answer, the question of "who is the client" of the lawyer. Unhelpfully, they reached inconsistent conclusions, and in addition strayed outside the Committee's jurisdiction.

The Professional Ethics Committee is to interpret the Michigan Rules of Professional Conduct (the "MRPC" or the "Rules"). Those Rules themselves do not provide the criteria for establishment of a client-lawyer relationship. Indeed the Preamble (Scope) to the Rules states:

    [F]or purposes of determining the lawyer's authority and responsibility, principles of substantive law external to these Rules determine whether a client-lawyer relationship exists . . . . Whether a client-lawyer relationship exists for any specific purpose can depend on the circumstances and may be a question of fact.

In other words, determination of "who is the client" requires an examination of applicable substantive law, which is beyond the scope of the Committee's charge.[2]

The question of "who is the client" when the lawyer is retained by a fiduciary has not been conclusively answered as a matter of law.[3] The issues we should have addressed in our previous opinions, however, can be answered by application of the Rules of Professional Conduct.

In the situation presented in Opinion R-10, the lawyer had been retained by a fiduciary to settle a wrongful death case. The fiduciary was a member of the family that would be benefited by the settlement. The family members could not agree how to divide the settlement among them, and the questions posed for application of the Rules were whether the lawyer representing the fiduciary could propose a settlement that the lawyer created, or could represent the family member who was the fiduciary, individually, in a hearing on allocation. The opinion delved into an analysis of the Probate Code, the Wrongful Death Act, and various cases, after which it concluded that the lawyer represented the fiduciary as fiduciary, not the other heirs or beneficiaries. The opinion could have—and should have—proceeded on the basis that the lawyer had been retained by the fiduciary to represent the fiduciary, and in the absence of any other understandings in the engagement or requirements of applicable law, the lawyer had to consider her ethical duties in that context.

The questions to be considered in Opinion R-10 were the right of a lawyer to impose her own judgment in matters affecting the client and the client's duties to others; and whether there is any conflict between representing a person as a fiduciary and the person individually, when the interests or obligations of the fiduciary may or may not be consistent with the personal goals of the fiduciary outside the role of fiduciary. The Opinion first notes that the lawyer must make it clear to all heirs that she does not represent them, and owes them no lawyer-client duty, citing MRPC 4.3. This advice follows from the legal conclusion drawn earlier that the client is the fiduciary, not the heirs. However, such advice does not need to depend on that legal conclusion but from the engagement itself, as well as from consideration of the conflicts inherent in counseling a fiduciary about its legal duties while attempting to serve the personal interests of those for whom the fiduciary serves. This is a straightforward MRPC 1.7 problem. In its analysis of whether the lawyer engaged by the fiduciary may represent the personal interests of the person acting as fiduciary, the Opinion properly concludes that the lawyer cannot undertake representation of a second client when the serving of those interests would adversely affect the responsibilities owed to the first client.

In answer to the question of what may the lawyer do when the lawyer's view of the distribution plan differs from that proposed by the fiduciary, Opinion R-10 relied on MRPC 1.2 in concluding that the lawyer must advocate the plan proposed by the fiduciary, unless that plan proposed something illegal or fraudulent. On this basis we could conclude that the lawyer will need to subvert her own views about the "right" plan to the client fiduciary's in the absence of fraud or illegality. Rule 1.2(a) and Rule 1.4(a) require the lawyer to consult with the client about how the client's objectives are to be met. Consultation is not limited to avoidance of illegality or fraud. The lawyer is an advisor, as noted by Rule 2.1, which expressly encourages a lawyer to provide advice:

    In representing a client, a lawyer shall exercise independent professional judgment and shall render candid advice. In rendering advice, a lawyer may refer not only to law but to other considerations such as moral, economic, social, and political factors that may be relevant to the client's situation.

Although in the ultimate analysis, a lawyer will need to advocate the client's plan, the lawyer is not ethically constrained from counseling the client about the merits of the lawyer's ideas about the plan.

The Opinion does not discuss the lawyer's choice to withdraw from a representation as provided in MRPC 1.16(b).[4] That Rule allows the lawyer to withdraw in a variety of situations, including belief that the client is pursuing a repugnant or imprudent objective, as well as in circumstances of crime or fraud.[5]

The facts underlying Opinion RI-304 were somewhat complex: In the course of representing a fiduciary for an incapacitated person, the lawyer settles a claim by a health care provider against the incapacitated person, and proposes to retain a portion of the recovery from a third person (an insurer) used to pay the claim as compensation for services. The claimant agrees to accept two-thirds of the recovery, and the lawyer retains the other one-third. The Committee concluded that such a contingent fee contract between the lawyer and fiduciary is permissible so long as it is entered into in compliance with the Rule governing contingent fee agreements[6]. The Committee also opined that the contractual agreement by the health care facility to reduce the charges to the legally incapacitated person by one-third and pay that sum to the lawyer did not elevate the facility to client status, which would create a conflict of interest requiring consent from both the fiduciary and the facility.

The ethics problem presented for Opinion RI-304 appears to be limited to MRPC 1.8(f), which pertains to payment of legal fees by another person. However, the Committee instead focused on whether the client was the fiduciary or the incapacitated person – not to answer the question of who was required to give consent under 1.8(f), but to answer whether there was a conflict of interest by the lawyer's "representing" the claimant health care facility under MRPC 1.7. This answer had nothing to do with the ultimate result or purpose of the Opinion. The conclusion reached disagreed with Opinion R-10, and relied on a Court of Appeals decision[7] to conclude that a lawyer retained by a fiduciary represented the "entity" that the fiduciary served (in this case, the incapacitated person), not the fiduciary itself.

The Committee was next asked to explain the differing conclusions in Opinions R-10 and RI-304 about who was the client – the fiduciary itself or that for which the fiduciary acted (either the "entity" or the cestui que use—the beneficiary), and issued Opinion RI-342, which was written solely to address the "who is the client" question.  It agreed with Opinion R-10, thereby replacing RI-304, in concluding that the client was the fiduciary for the incapacitated person. Opinion RI-342 notes that an incapacitated person could not be an entity, but also notes that, in the fact situation presented, whether the client was the fiduciary, the beneficiary, or some impersonal entity, the ethics advice given in Opinion RI-304 would not have changed – the claimant was not the client merely because it agreed to have the lawyer satisfy its fees agreement from amounts it was due.

The identity of the client presents a substantive legal issue to be determined by the lawyer under the particular circumstances of the representation. The answer to that question is not found in the Rules of Professional Conduct, and is not itself a matter of legal ethics; and the Committee's statements in answering the question are not authoritative. Opinions R-10 and RI-342 are thus limited.

The situations considered in the two opinions provide the basis for a number of meaningful conclusions under MRPC, which we summarize here:

  1. The MRPC address duties to clients as well as to non-clients. In order to carry out those duties, the lawyer will need to ascertain who is the client and who is a third person or a non-client that may be affected by the representation. In an area such as fiduciary representation, where the law is not definitive but the actions of a fiduciary will almost certainly affect others, we recommend having a clear engagement letter defining the client; and that persons who are not clients but who may be affected by the definition be advised of that fact. See MRPC 4.3.
  2. A lawyer may not interpose her own judgment for that of the fiduciary client in proposing an allocation of a settlement among several recipients. MRPC 1.2. The lawyer has a duty to advise, and may provide the benefit of knowledge beyond legal advice. MRPC 2.1. If the fiduciary client proposes action contrary to the lawyer's advice, the lawyer may resign from the representation under MRPC 1.16(b); and if the fiduciary requires the lawyer's assistance in carrying out illegal or fraudulent conduct, the lawyer must resign the representation. MRPC 1.2(c); 1.16(a)(1).
  3. It is a conflict of interest for a lawyer to represent both the fiduciary and a beneficiary unless the personal interests of the beneficiary are fully consistent with the obligations of the fiduciary and both parties have consented, as required under MRPC 1.7. Whether the fiduciary and the beneficiary are the same person or different persons makes no difference.
  4. A fiduciary may hire a lawyer under a contingent fee agreement to represent the interests of an incapacitated person. Such an agreement would need to be in writing and comply with the other provisions of MRPC 1.5 governing contingent fee agreements. A contingent fee agreement between a lawyer and a fiduciary may provide that the lawyer may be compensated on the contingent fee basis for future activity of the same nature.
  5. A fiduciary or the lawyer for the fiduciary may enter into a contract with the health care facility providing services to the incapacitated person, under which the health care facility would agree that a reasonable percentage of the amounts collected by the lawyer for the fiduciary from the incapacitated person's insurance provider could be paid over to the lawyer rather than paid over to the health care provider. The fee agreement should be entered into between the lawyer and the fiduciary client, and otherwise comply with MRPC 1.5(c). In order to avoid concern about conflict between the lawyer's own interests and that of the client in the lawyer's fee plan under MRPC 1.7(b), there should be proper disclosure to, and consent by, the fiduciary as to all of the elements of the contingent fee arrangement.
  6. Although the source of the fees is by an agreement with a third person—the health care provider—to debit amounts due to it by the amount of contingent fees owed to the lawyer by the fiduciary, this fact does not invoke the concerns addressed by MRPC 1.8(f) when the lawyer accepts compensation from another for representing a client. Here, there appears to be no risk that the health care provider controls or interferes with the work of the lawyer in representing her client in obtaining funding for payment of the client's obligations. The claimant has agreed to accept less, so that fees can be paid for the lawyer's work on behalf of the client. The purpose underlying MRPC 1.8(f) is the same as that served by the mandate of MRPC 5.4(c)—protecting the professional independence of the lawyer in pursing the interests of the client. When entering into arrangements such as that posited in RI-304, the lawyer must assure that professional independence is not compromised.

[1] Opinion RI-342 was issued to "correct" RI-304, which had disagreed with the conclusion of R-10 on the question of "who is the client."

[2] The Committee notes that MRPC 1.13 expressly provides that a lawyer who is retained to represent an organization represents the organization as distinct from its constituents, including officers, directors, shareholders and the like. This Rule does not establish a lawyer-client relationship, but does clarify that the lawyer's duty is to the organization itself. One line of reasoning in the cases of representation in the fiduciary context follows the principle of MRPC 1.13, and would support the view that the lawyer represents the trust, and not the fiduciary or beneficiaries. See, Steinway v. Bolden, 185 Mich App 234, 460 NW2d 306 (1990). MRPC 1.13 does not apply beyond its terms.

[3] R-10 cites a number of cases, conceding that legal authority on who is the client in this factual setting was not unanimous at that time. Subsequent case law continues to reveal cases rationalizing differing results, and providing no more definitive statement. See, for example, In re John Ervin Testamentary Trust, 2005 Mich App Lexis 258, app den by Evans v. Bank One Trust Co NA (In re Ervin Trust), 474 Mich 932, 706 NW 2d 14 (2005), disagreeing with the conclusion of Steinway, supra note 2 without citing it; and also In the Matter of the Estate of Calvin Graves, 2009 Mich App Lexis ______ #286674, suggesting that the lawyer represents both the fiduciary and the beneficiary (10.27.09; op. vac. 12/3/09; publication rescinded 2/18/10). The Restatement of the Law, The Law Governing Lawyers, Sec 14 Comment f, notes that there is no certain rule of universal application; and that where the law is not clearly established, lawyers should clarify who is the client and to what extent in their contract of engagement. Since RI-304 was issued, the court rules and statutes have changed substantially, but without more definitive result. The Estates and Protected Individual's Code ("EPIC") provides that a fiduciary may hire a lawyer to represent the fiduciary, at the expense of the estate or trust. See MCL §700.3703 and § 700.3715(w). EPIC has not been interpreted through case law to provide a clear statement of the creation of the lawyer-client relationship, and the right to hire and pay for a lawyer is not the test of whether a lawyer-client relationship has been established. MCR 5.117 indicates that when a lawyer files an appearance for a fiduciary the lawyer represents the fiduciary. We do not attempt to answer whether a court rule provides a rule of substantive law. Although MCR 5.117 is the clearest statement about "who is the client," the Court in Graves, cited above, nevertheless apparently found it not compelling.

[4] R-10 applies MRPC 1.16(a) as requiring withdrawal if the fiduciary's plan is illegal or fraudulent. Withdrawal is mandatory if the "representation will result in a violation of the Rules of Professional Conduct or other law." The Rule applies only if the client requires the lawyer to engage in such conduct. MRPC 1.16(b)(1) permits withdrawal when the client uses the lawyer's services in a course of action the lawyer considers criminal or fraudulent.

[5] R-10 makes note of the fact that MRPC 1.2 forbids a lawyer from assisting a client in conduct the lawyer knows is illegal or fraudulent, differing from the Model Rule's formulation of "criminal or fraudulent" and thus potentially requiring a Michigan lawyer to abide by a stricter standard. Note, however, that the right to withdraw under MRPC 1.16(b) is limited to "crime or fraud." Thus, unless the conditions for mandatory withdrawal under 1.16(a)(1) – violation of a MRPC – exist, there is no right to withdraw for civil illegality under Michigan's Rules.

[6] MRPC 1.5(c).

[7] Steinway v. Bolden, note 2.

 
     

 

follow us
Follow Us on Facebook Follow Us on LinkedIn Follow Us on Twitter Follow the SBM Blog

 

©Copyright 2014

website links
Contact Us
Site Map
Website Privacy Statement PDF
Staff Links

SBM on the Mapcontact information
State Bar of Michigan
306 Townsend St
Lansing, MI 48933-2012
Phone: (517) 346-6300
Toll Free: (800) 968-1442
Fax: (517) 482-6248